Fantasia announced third round of restructuring plan

Back in early 2023, Fantasia announced its first round of offshore restructuring plan, but it did not go through eventually because the company’s second largest shareholder, TCL Industries Holdings, objected to the debt-to-equity conversion. Then, Fantasia published the second round of restructuring plan in April 2024. However, the company continued to extend the deadline of the restructuring support agreement even though it has gathered sufficient support already. This has led to suspicions that, due to industry conditions being far worse than expected and the company being unable to fulfill the commitments in the plan, they may have to terminate the scheme once again. 

Finally, on 4 August 2025, Fantasia has announced the third round of restructuring plan. This time, the overall framework of the new plan is largely different from the previous plans, with all three options provided include a significant principal haircut. As the time of the announcement of the proposal, Fantasia has entered into a restructuring support agreement (“RSA”) with an ad-hoc creditor group holding over 34.9% of the outstanding principal of USD bonds (“AHG”). The company is now asking other bondholders to participate in the RSA. 

This scheme is applicable to all 13 existing USD bonds. As it is not an exchange offer but a restructuring plan through the Hong Kong and Cayman courts, it requires only 75% approval to pass and then should be binding on all bondholders. 

Bondholders who participate in the RSA by 3 September 2025 can receive an early consent fee of 0.1% of the principal amount, payable in ordinary shares or short term bond (in-kind) at bondholder’s discretion. Bondholders who participate in the RSA by 17 September 2025 can also receive a base consent fee of 0.1% of the principal amount, but only payable in short term bond (in-kind).

(The following information is for reference only and the details are subject to the original announcement.)

The Third Round of Restructuring Plan

The scheme creditors’ claims in the restructuring plan will cover all 13 offshore USD bonds and other guaranteed debts (the principal amounts are around USD 4,020 million and not more than 900 million respectively), but this time will not include any accrued interest.

The new restructuring plan offers three options, and creditors can freely allocate their claims between them. The details are shown below (see Table 1):

Table 1: Details of the Options

Below are the details of different instruments (see Table 2):

Table 2: Details of the Instruments

• The coupon of short-term bond in 2026 and 2027 will be paid in-kind. At least 0.5% and 1% of coupon in 2028 and 2029 must be paid in cash. After that, all coupon must be paid in cash.

• The coupon of long-term bond from 2026 to 2031 will be paid in-kind. After that, all coupon must be paid in cash.

Same as the previous round, the controlling shareholder Zeng Jie Baby will inject USD 6 million in the form of borrowings to Fantasia to fund the fees and expenses. However, it is worth noting that in the previous plan, the amount of consent fee, AHG’s work fee and advisor fee were clearly stated to a total of USD 21 million, whereas this time they are not specified. Based on our understanding, the related fees this time may be lower than last time, and will be payable entirely in the form of the company’s ordinary shares. In addition, the conversion price should not be higher than that of the consent fee paid in the form of shares.

On the other hand, all of the 9 company's outstanding shareholder loans (the principal amount is USD 170 million) will also be converted into ordinary shares, with a conversion price of HKD 0.3 per share.

Similar to the previous plan, Fantasia has also included some credit enhancement measures for the short-term bond and long-term bond (with the short-term bond holds higher claim priority). Those include a pledge over shares of Colour Life held by the company (but it is subject to the conclusion of the dispute with TFI Securities on underlying shares), as well as arranging designated onshore projects into an asset package (the new list includes five more projects compared to the last time). Upon consummation of the sale of any item on the list, an amount equal to 40% of the net consideration shall be transferred to the onshore bank account that is used for the cash sweep repayment of the bonds within five business days. In addition, the short-term bond also includes equity stakes of US nursing home project as collateral.

Commentary

We think this new plan proposed by Fantasia is clearly less favorable compared to the previous one. Not only does it exclude all accrued interest, but the magnitude of principal haircut is also much higher than before, significantly reducing the plan’s overall appeal.

Taking Fantasia’s (1777.HK) current share price of around HKD 0.074 as a reference, the principal haircut exceeds 95% for both the direct conversion in ordinary shares and the mandatory convertible bond (as both options have a same conversion price of HKD 1.52 per share). As a result, the debt to equity instruments are not attractive, and Option 3 is only suitable for creditors who wish to recover just a small amount of cash quickly.

Comparatively, the short-term bond is more attractive than the long-term bond due to the additional credit enhancement measures. However, since Option 1 offers only a maximum of 25% principal conversion into short-term bond, this means the haircut amount is still over 70%. Meanwhile, Option 2 offers 60% principal conversion into long-term bond, which should be more suitable for bondholders who are able to wait for a longer period.

Furthermore, the maximum acceptance amount for each option is fixed. It means that even if creditors go all-in for a certain option, they may still not be able to receive 100% of their desired instruments.

Upon the completion of share issuance, we expect the controlling shareholder Zeng Jie Baby and existing creditors will each hold approximately 40% stakes in Fantasia, while the minority shareholders (including TCL), and the AHG and its advisors (only including the fees portion) will each hold approximately 10% stakes. Same as the last time, the AHG and its advisor will charge a decent sum of fees, and Fantasia will report to AHG on all debt-related matters. The AHG can even discuss directly with the company and make decision on various terms.

Declaration: For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) holds positions in FTHDGR 6.950% 17Dec2021 Corp (USD) and FTHDGR 7.950% 05Jul2022 Corp (USD), and the analyst who produced this report holds a NIL position in the abovementioned securities.